Food Cost

I am Chef and F&B Director of a conference center that does 5 million per year in revenue. When I started here 3.5 years ago, the food was all frozen pre-made, the kitchens were filthy and revenue was only at 3 million. My company projects budget for all areas at the beginning of every fyscal year, my problem is they keep projecting my budget to run a 10% or less for food cost!! As our fysical year approaches its end in about a week, I'm currently at 12% food cost and I'm still providing high end food, but could provide more high end if my budget would increase. I unfortunately have a CEO and Executive VP that generate my planned budget who have very little understanding of operating a kitchen.

Has anyone else run into this similar situation??? If so any insight to improve??

I just find it absolutely ridiculous to even expect a 20% food cost when trying to cater to weddings and upscale events. Oh, and I didnt mention we are 100% glatt kosher, which increases cost of meats by almost triple of regular meats.

What sales are they measuring the food cost against? It sounds like it must be total revenue for the entire property, including beverages, room rental, table charges, setup, parking, etc. I say that because pricing high enough to run a 10% food cost, based only on food sales, would price you completely out of the market. I don't know anywhere in the US that would be possible. Are you located outside the US? What all revenues are being included in the food cost calculation? We have to make sure the process is standardized to make any sort of comparison.

Also, are there any credits given toward food cost for promos, VIP programs, food minimums? We have to know how you are already getting to the 12% number. Is there a website for the facility?

I cant even comprehend how you can run a 12% food cost. 10% would be impossible IMHO! Lower food cost items such as Pizza and Pastas

normally run in the low 20s and unless you are doing concession type prices (5 dollar beers,sodas and dogs) I find this figure just flat out wrong. Weddings and social catering events normally run in the 30s and at a 12% food cost with revenue at 5 million thats only $600,000 for your annual food and beverage budget. For example I ran a 120 bed acute care hospital in the late 90s and my annual budget for the patients, cafeteria (money maker), and Doctors lounge was $225,000 (mid 30s) and a lot of this was hospital food. Your operation sounds much larger but then again the greed of the rich never ceases to amaze me. Good luck with the budget...............................

10% ??????? 12%???????? what type of food do you serve and what market are you in? what was the food cost when everything was frozen? what are you charging per person? so many questions but i can't understand how your operation is still doing that kind of business at the prices they must be charging to have a 12% food cost. if you're at all responsible for increasing sales by $ 2 000 000 they should probably leave you alone and give you a substantial bonus. do you need to use kosher for everything?

To answer everyone at the same time here are the answers to your questions and thanks for all of the feedback.

- We are a 270 acre conference center in the middle of no where in PA

- We are an all inclusive location and this again where a problem lies because I have asked over and over and in 3.5 years still never given an answer as to how much $$$ from the total cost of the event is directed at food, I generate food cost based on these all inclusive numbers because with our 300+ sleeping areas we only have 2 housekeepers and 2 people in laundry so the majority of the money has to go to food because there is no where else it can go..... this could also be the slight deception in seeing I'm running at 12% food cost but again I'm going on the only numbers I am given

- Yes everything has to be Kosher no way around it. There is a rabbi there everyday, he has to cut on all burners and ovens, check all deliveries, I do not even have keys to my own kitchens due to Kosher regulations

- Yes I know I have been a large part in the $2 mil revenue increase because of what I've brought to the table... bonus???!!! I would love one but haven't seen it!

- All of our business stays over night, and are onsight for an average of 5 meals. For a standard event (ex. Friday dinner-Sunday breakfast) we charge $180 per person, I attach additional charges for upgraded menu's such as prime rib, sushi bar, action stations, ect....

- Part of my low cost and yes this year I have spent right under $600,000, is we make EVERYTHING in house, dressings, sauces, stocks, soups... I even am known to get whole chickens and break them down myself (600#'s at a time) just to save money so my bosses dont get pissed

I think I've answered everyone and your comments lead to where I was I just need to go further, I know these numbers are crazy... I need to know how to approach a CEO and Exec VP that if they want can say "your fired" any time they want.

You need a moderator to help you talk to them. When they say "food cost", they are talking a completely different language than you. You sound like you are on top of the kitchen operationally, but I'm concerned as to why you weren't aware enough about food costing in general to mention in your question up front that the food cost is based on total revenues of the property and not just food. That is not a normal accounting or record keeping practice in any sector of the hospitality industry. As long as they are not giving you food sales data to measure your own food cost, and setting goals based only on food revenues, there really is no way for you or them to know whether you are doing well or not. Currently, your food cost is GREATLY affected by revenue generation that is completely out of your control because it has nothing to do with food.

In my opinion, you can't even start a discussion about goals when the process they have for measuring your food cost goal is completely wrong. If I were you, I would ask to have a conversation about how food cost should be measured, moderated by an industry expert, so they don't ignorantly assume you are just making excuses.

If you are running a 12% F.C and are kosher which cost more, you must be feeding themshredded newspaper and water. Something is wrong. If they wont tell you percentages then the hell with it , just keep om doing what you are doing and dont worry about it.

Retreatchef....something you said caught my eye and raised a red flag.

You mentioned Prime Rib and Sushi

Now as this place is Kosher that Prime Rib has to be very expensive. Kosher Prime rib means that the Sciatic nerve and surrounding fat was removed so that it can be Kosher. At $19.99 a pound the going rate and you keeping a 12% food cost....there is something definitely wrong here. In Kosher restaurants in New York charging $68.00 a plate (a la carte) for that piece of meat is the norm. Sushi and Kosher means a very narrow list of fish that can be used. There is something wrong in the state of Denmark here.....

Actually the last case of ribeye i purchased was $13.99 per pound, and yes i know I have a limited list of fish acceptable for use (i have been working there for over 3 yeras)....so what exactly was the purpose of your comment?

I don't see why everybody is obsessing about the 10% when that doesn't seem to be the original direction for this thread anyway. Yes their accounting system runs on a different model than most on here are used to, but so be it. Yes it appears that they arrive at food cost based on total sales for the entire property, but so be it. As long as they consistently crunch numbers the same way all the time, then they will get the data they need to judge the efficiency of their operation, whether it is the system that I would choose or not. I believe the original direction for this thread was how to approach the higher ups about potentially increasing the budget for food.

Actually the last case of ribeye i purchased was $13.99 per pound, and yes i know I have a limited list of fish acceptable for use (i have been working there for over 3 yeras)....so what exactly was the purpose of your comment?

Click to expand...

RetreatChef....

No sir I am just questioning the cost of Kosher Prime Rib with a 12% food cost.

$13.99 a pound is a great deal.

As I said before that meat is very labor intensive to produce so, I was just questioning how the place handles something like that high cost.

I don't see why everybody is obsessing about the 10% when that doesn't seem to be the original direction for this thread anyway. Yes their accounting system runs on a different model than most on here are used to, but so be it. Yes it appears that they arrive at food cost based on total sales for the entire property, but so be it. As long as they consistently crunch numbers the same way all the time, then they will get the data they need to judge the efficiency of their operation, whether it is the system that I would choose or not. I believe the original direction for this thread was how to approach the higher ups about potentially increasing the budget for food.

Click to expand...

If they are including revenues outside of food sales, then they aren't judging the efficiency of their operation consistently. If food sales remain constant and he is on top of his costs, but A/V rental revnue and room rental revenue take a dive, his food cost is going to skyrocket through no fault of his own. There is no way to consistently measure the efficiency of the food production using numbers that have nothing to do with food, regardless of whether it is done the same each time or not.

It doesn't matter whether food sales remain the same or not. That was a reference point to create a "control" in the example. Whether food sales are the same or fluctuate, the cost of goods shouldn't that much. But when you factor in other revenues into the food cost that have nothing to do with food, they can skew the food cost greatly.

Here's an example:

Revenue:

Food $50K

Alcohol $20K

Hotel Rooms $70K

Banquet Rooms $5K

A/V Rental $5K

Expenses related to food costs:

Food $15K

Figuring food cost their way, as a percentage of total revenue, you get a 10% food cost. Figuring it the way it's done in every suggested standard from professional organizations, even in the hotel industry, it's 30%.

Possible scenario 1, hotel room rental is down for the month, but food revenue and expenses stay contant:

Revenue:

Food $50K

Alcohol $20K

Hotel Rooms $50K

Banquet Rooms $5K

A/V Rental $5K

Expenses related to food costs:

Food $15K

The resulting food cost figured their way would be 11.5% due to less hotel rooms being booked which is completely out of the chef's control. The actual food cost, figured using industry standard practices, is still at 30% however.

Possible scenario 2, just to demonstrate during a month where food revenues change:

Revenue:

Food $40K

Alcohol $20K

Hotel Rooms $82K

Banquet Rooms $4K

A/V Rental $4K

Expenses related to food costs:

Food $15K

In this scenario, food revenue could be down, and the actual food cost high at 37.5%, but they would never know because the way they calculate it, the food cost is still 10% of total revenues. To them, this scenario looks more attractive than scenario 1, when in reality, the food cost is well out of whack (assuming its budgeted at 30% in the scenarios)

Any way you shake it, you can't use revenues other than food revenues to give you an accurate picture of what is happening in the kitchen. You lose track of what is truly happening. Even when only using food revenues, you still can't know if a high food cost is a good or bad thing if you aren't also calculating what the ideal food cost should be, based on what sold and the recipe costs of those items.